A Comprehensive How to Guide For Achieving Stock Market Success:
Most how to guides for the stock market are all the same – focusing on the best brokerage platforms, newsletter subscriptions, and other nonessential factors for achieving consistent success. But with over 90% of traders failing, it’s clear that the typical guidance simply doesn’t work. These guides provide information that flat-out doesn’t help people find the success they seek. This how to guide, however, will be different. By cutting straight to the core of trading success, you can finally focus on what really matters.
Try out this quick mental exercise: take a moment to truly think about why you’re researching how to guides for the stock market in the first place. Seriously pause and consider it because this exercise will prepare you for success. Are you interested in trading for the status, recognition, and wealth it can provide? What thoughts, feelings, and images pop into your mind when you think of the unlimited potential? If you have fancy cars, mansions, and stacks of money in your head right now, recognize that it’s completely normal. But solely focusing on results is what leads to failure.
The process has to come first, and that process includes fully understanding yourself, the market, and creating harmony between the two. If done correctly, your trading results will take care of themselves.
5 Simple Steps to Generating Consistent Profits as a Stock Trader:
STEP #1: Understand the Realities of the Market Environment
Most people jump into the stock market without a full understanding of its true nature. The four main market characteristics are that it’s constantly changing, uncertain, limitless, and neutral – and there are countless psychological implications of these particular qualities. One of the most common disconnects between traders and the market is that we unrelentingly crave certainty, but it’s a characteristic that the market simply doesn’t provide. So when we try to force our desires and expectations onto the market – our emotional attachments to having our personal predictions validated, for example – the results don’t often turn out great.
The truth is that becoming an effective trader requires going against many of our natural tendencies. Nobody is born with personal characteristics that align with the market. The fact is that we have to be develop them. There are numerous businessmen, lawyers, doctors, etc. – highly regarded individuals in their particular professions – who think they can just step foot into the market and automatically be great traders based on their levels of intelligence and past success. But that’s just not how the market works. The market doesn’t care what you look like, what your IQ is, or what certificates or degrees you have. It’s completely indifferent to all of those typical measures of intelligence and success. Operating in this unique environment requires a special mental framework.
STEP #2: Discover How You Are Personally Wired
Common themes materialize in causing the destructive habits for most traders, but the reality is that we all have unique programming. Based on prior conditioning from experiences with our family, friends, books we read, shows we watch, and all kinds of other sources, we develop a strong view over time of who we think we are. Everything we’ve experienced in the past has imprinted on us to shape and color our individual perception of reality. So if your parents always told you as you were growing up that “money is the root of all evil”, then you probably internalized that phrase subconsciously. Now as a trader, this belief of yours is in direct conflict with your goals.
The only time traders can reach the objective of consistent profitability is through a concentrated process of digging deep. You can’t take the same surface-level approach that over 90% of traders take because those are the traders who end up failing. You have to develop a level of self-awareness that is unlike the masses. Some common struggles amongst traders include removing stop losses, letting losses build, and doubling down on losing positions in hopes of a rebound. But if the symptoms are treated without finding the root cause, the negative behaviors will only continue to persist. Without realizing it, most traders allow their default habits of thought and emotion control their behaviors. As a result, they mindlessly choose short-term emotional gratification over long-term trading success. The bottom line is that your mindset has much more of an impact on your results than you think.
STEP #3: Align Your Mindset With the Realities of the Market
Wouldn’t it be nice if your attitudes, beliefs, perspectives, and behaviors were in harmony with the market instead of at odds with it? Your old patterns of thought, feeling, and behaving may have helped you get through certain situations in the past, but within the market environment these patterns are no longer serving you. Acting on your survival instincts – the tendency to react impulsively to perceived threats – will only lead to destruction. Instead of perceiving the market from an objective and rational point of view, we have a natural propensity to distort it with our own subjective and irrational views. So we have to change if we want success.
This process of self-transformation is possible by building new neural networks. Our old habits of thought and behavior are strong from years of repetition, but we can weaken and eliminate them by focusing our intentions on better alternatives. This process is known as neuroplasticity and we can use it as a powerful tool for directing our mindset toward our goals. Eliminating old, ineffective patterns and replacing them with new, effective ones will feel awkward and difficult at first, but over time the old patterns will weaken while the new patterns become automatic. The initial difficulty is simply a sign of internal conflict – your current self against your desired self – but becoming your desired self will be much more rewarding and fulfilling in the end than giving up the battle.
STEP #4: Develop a System With a Statistical Edge
The typical trader skips over steps 1-3 entirely and dives headfirst into the limitless world of strategies and systems. Doing so, however, undermines the foundation of consistent trading success. You see, the consistency and discipline you seek won’t come from some external source – it has to originate from within you. So whatever strategies or systems you end up finding and implementing will inevitably be sabotaged by your improper mindset. The huge leap straight to this step also increases the chances of you descending into the deceptive world of “gurus” and “hot stock picks”. Trust me, this path doesn’t work – especially with the wrong mindset.
By choosing to develop the proper mindset first, you now possess one of the major components for consistent success. The only other ingredient is a system with a statistical edge. Whether you find a system elsewhere or develop one on your own, you’ll be much better equipped to not only follow it, but also refine it, if you attain the proper mindset first. Cultivating the calm, balanced, disciplined, consistent, and objective mental framework necessary for trading success requires you to detach from the actions of the masses. In doing so, you develop a deeper understanding of the herd. A group you were once a part of, but lost within. Now, however, your bird’s eye view allows you to see the entire forest instead of being distracted by all the trees. Your perspective becomes one of clarity, resulting in the acquisition of a probabilistic mindset. You now possess the two critical components for consistent profitability.
STEP #5: Execute Your Validated System With Your New Effective Mindset
When we boil it down, these are the two core components required for systematically pulling profits out of the market: 1) a validated system and 2) the proper mindset. The validated system is your statistical edge that produces positive results over a large number of trades, and the proper mindset is what allows you to execute on that edge with the highest degree of discipline. When experiencing struggles, most traders assume they have a system problem, when in reality, they have a mindset problem.
When traders jump from system-to-system, violate the rules of their system, or have unclear rules for their system, it’s a signal that they have an improper mindset – a lack of confidence and trust in their process. Without the structure of a specific system, along with the proper mindset, your trading operations are nothing more than random and impulsive. There’s no way to test and refine your system if you can’t even follow it. This is where most traders stumble and fall. They think trading success solely comes from some specific indicator, setup, or pattern, but when they find one they think they can develop a system around, they don’t have the patience or discipline to stick to it. Then it becomes the guru’s, system’s, or overall market’s fault. Taking full responsibility for your process (validated system plus proper mindset) is the first step toward consistent profits in the market.
Top 2 Recommendations For Generating Your Validated System and Optimal Mindset:
2ndSkies Trading With Chris Capre
2ndSkies Trading teaches the core skills and mindset required for mastering the stock, options, and forex markets. While most other trading services out there focus on marketing themselves as “guru’s with explosive returns” and sending out “hot stock alerts”, 2ndSkies actually focuses on turning their students into knowledgeable, skilled, and self-sufficient traders.
The truth of the matter is that while these “hot stock alert” services seem attractive at first glance, they’re almost always too good to be true. Trying to blindly copy alerts as your method for achieving consistent profitability simply won’t work. But worst of all, you’re nothing more than a subscriber. Your personal success is far less of a priority than their ability to collect recurring monthly, quarterly, or yearly subscription payments from you. Stick with a community like 2ndSkies that actually has your best interests in mind.
Trading Composure With Yvan Byeajee
Trading Composure is mainly focused the psychological aspect of trading. There are no courses on specific setups, indicators, or how to read candlestick charts. But if you’re new to trading and looking to build the proper mental framework, or you already have a specific system in place but need to work on your mindset, then this is a great place to learn.
Yvan’s Trading For a Living and Trading Psychology Mastery courses are what drove me away from the destructive cycles of random and impulsive trading, and steered me in the direction of consistent and disciplined trading. There’s no doubt that most traders are struggling, just like I was before coming across Trading Composure. They enter the market full of excitement – looking for thrills and potential riches. But then their insecurities, fears, and ineffective habits start producing negative results. What once was exciting quickly turns into an emotionally and financially afflictive experience. But this can be avoided by acquiring the proper mindset.
Conclusion – Your Guide to Consistent Profits is a Statistical Edge Plus Optimal Mindset:
This 5 step how to guide is the framework for becoming a consistently profitable trader. Most stock market guides offer nothing more than surface-level information. It’s fine information to have, but it won’t provide you with a legitimate edge in the market. The real edge comes from developing a deep level of self-awareness. Many traders continue going through the motions, making the same mistakes over-and-over again, failing to realize their unconscious, destructive patterns of thought running in the background.
But if they truly had the courage to take an introspective journey in order to figure out the root cause of their struggles, then they could be in the 10% of successful traders, instead of the 90% that fail. The majority of traders succumb to these odds by trying to take the easy way out. It’s just human nature – the principle of least effort. But becoming a consistently great trader requires doing many things that initially seem unnatural, like overcoming impulsive fight-or-flight responses and choosing long-term rewards over short-term pleasures. Unfortunately, most traders try to attack the market each day with their current identity, but their current identity isn’t capable of achieving consistent trading success. In the end, a paradigm shift has to be made in order to achieve success.
Resistance is required for personal growth. Most traders avoid the necessary resistance, change never happens, and failure is the result.
Written by Matt Thomas (@MattThomasTP)
Related Pages:
- What is the Foundation For Stock Trading Success?
- What is the Success Rate For Day Traders? Why is it So Low?
- How to Eliminate Bad Trading Habits and Develop Good Ones
- What is the Core of Trading? It Boils Down to a Simple Equation
- A How to Guide For the Stock Market – Achieving Consistent Profitability
Trading in stocks was a short stint for me. I think it was because the very first step of understanding the market realities was missing from my list. My sole focus was on finding the stocks (long-term or short-term) that can fetch me fast money. That is why I failed. I never tried my hands again in stocks.
This 5-step guide seems to be different. What I learned is apart from the understanding, knowledge, and system the most important part is patience and persistence. Failure is natural, but resisting with a personal mindset towards achieving greater success will bring rich benefits in the future.
Thank you for this!
Hi Arif – you’re far from being alone in your experiences. In fact, most traders enter the market completely “out-of-sync” with it. They fight with the market instead of flowing with it. In essence, they create painful and afflictive experiences for themselves, instead of smooth and enjoyable ones. My personal opinion is that if trading feels like “war”, then you’re most likely approaching it wrong. There are many traders who characterize it this way, but doing so means it’s a stress-provoking endeavor. So you’ll most likely be trading from a survival mindset (impulsive and irrational) instead of being balanced, structured, and consistent. Most traders fail to realize that being aligned with true market characteristics will require personal changes in certain attitudes, beliefs, and perspectives.
One of the biggest blocks to trader success is the obsession over results. It’s easy to get caught up in the potential rewards (money, cars, houses, etc.), but letting your thoughts and emotions be dominated by this type of thinking is exactly what leads to failure. When people actually start trading, they tend to get so caught up in short-term results that they end up sacrificing their long-term goal of achieving consistent profitable. They become so wrapped in the outcome of each individual trade, that it leads to impulsive and irrational behaviors in order to avoid losses, being wrong, missing out, etc. We receive instant emotional gratification by acting impulsively, but it sabotages our long-term results. In the end, it would serve traders much better to be mindset and process-focused instead of results-focused. After all, if the process is strong, then the results take care of themselves.
Hi. What an excellent and deeply perceptive article. Do you think though there is a spectrum between someone who is a pure trader and someone who is an investor? Or is that just semantics? Isn’t it also true that to be a successful trader you not only have to acquire the right mindset but you have to understand where you are comfortable on the spectrum of very long-term investor vs, day-trader? When I think back on my most successful periods of investing it was indeed when I had a system, that actually I had developed from a widely read book. It was so automatic I didn’t even check what most of the companies I was buying into were doing. I just had to make sure that the symbol was right and my stock screener hadn’t got the wrong data. It worked consistently for many years. Anyway, this is a fascinating topic. I will chase down the resources you have recommended. Thanks and best regards, Andy
Hi Andy – great questions and I’m glad you brought them up. There is definitely a spectrum that goes from short-term trader to long-term investor. On the short-term trader side, there are day traders and swing traders. On the long-term investor side, there are value investors and buy-and-hold investors. Although the terms “trading” and “investing” are often used synonymously, the approaches on each end of the spectrum can be drastically different.
For example, day traders mainly concern themselves with short-term spurts of volume and volatility, looking for quick in-and-out profits. They can enter or exit trades within seconds, minutes, or hours. Swing traders are a little bit more flexible as far as hold times. They might not have the ability to monitor the market on a tick-by-tick basis, so they’re looking for trades that might take a few days or weeks to pan out. Many day traders are also swing traders, and vice versa – depending on personal preferences, availability during market hours, current characteristics of the market, etc. Sometimes market conditions can be more suitable for certain day trading strategies, while others can be more suitable to certain swing trading strategies. For the most part, short-term trading strategies can be categorized into day and swing trading.
With that being said, swing trading can also be stretched into hold times of a few months or longer. In my experience, swing trading is mainly a shorter-term approach, but it can potentially be expanded into a longer-term approach. In essence, swing trading sort of covers the large middle ground in-between day trading and long-term investing. For long-term investors, the methodology is typically quite different than that of short-term trades. Long-term traders are almost entirely concerned with fundamentals – the actual strength of the company itself (revenues, profits, management, cash flow, etc.). In other words, they don’t care about intraday moves or whatever other technical analysis most short-term traders care about. All they’re concerned with is buying strong stocks with growth-potential, dividends, etc.
Overall, there is certainly some overlap, but short-term trading and long-term investing can involve very different approaches. There’s also no rule saying you can only be involved with one – you can be a short-term trader, long-term investor, and everything in-between if you choose to. In my opinion, having the proper mindset is critical to both traders and investors, but much more important for traders who are deeply submerging themselves in the market on a daily basis. As opposed to long-term investors, who might just be buying index funds with a dollar-cost averaging approach every month, and don’t even monitor their accounts other than that. Here’s an article on the top 5 investing principles to live by.
Mindset is a substantial component in both short-term trading and long-term investing – mainly for active traders and investors, as opposed to passive. I hope that helps answer your questions!
Change is never easy and most people resist it, but those who want to grow will have to push through the resistance.
The path of least resistance may be easier in the beginning, that doesn’t mean you’ve gone down an enjoyable route or even a correct one for your needs. If we’re not careful then all our hard work can just lead us back where we started from with no growth at all!
That’s exactly right! Everyone who gets into trading has destructive patterns – it doesn’t matter who you are. We all bring in our own patterns of thought, emotion, and behavior that might have served us well in situations outside the market, but they certainly won’t serve us within the market. Our survival instincts and natural biases can be incredibly destructive as stock traders. The worst part is that we might not even consciously recognize our destructive patterns because they’re so deeply ingrained, so most of us fail to realize that our trading woes are due to improper attitudes, perspectives, and habits. We tend to blame gurus, systems, and even the market itself because those things seem much more tangible in comparison. How can an invisible force like mindset make such an impact on results?
It’s only after making the same mistakes over-and-over-and-over again that traders might finally start to realize their patterns of mistakes and the critical importance of mindset. By then, however, they’ve often built up quite an adversarial relationship with the market (by trying to fight it instead of being in alignment with it) and have probably been on an extremely draining emotional and financial roller coaster ride. This is why I think broadcasting the importance of trading mindset is so important right from the start, even though it’s not the exciting and attractive thing that most traders want to hear or learn about. But it’s functional and effective – it actually helps them instead of hurting them. Unfortunately, most traders head down the road of gurus and hot stock picks, but as you can probably guess by now, that road doesn’t really work.
Seeing as guru programs and stock alert services are so popular, the success rate for traders wouldn’t be so low if they were actually effective at helping subscribers become consistently profitable. But they don’t work for the vast majority of subscribers. They’re nothing but ineffective shortcuts. Using them typically just makes the road to consistent profitability even longer, harder, and more expensive. It’s only the traders that take the psychological aspect of trading seriously that end up generating consistent success, and programs like 2ndSkies Trading, Trading Composure, and Mind Muscles For Traders are great for putting traders on the path of legitimate growth, development, and ultimate success.